Reserve Bank releases Annual Report

Release date

02 October 2008

The Reserve Bank is in good shape
to deal with current macroeconomic and financial stresses, Governor Alan Bollard
said today when releasing the Bank's 2007-2008 Annual Report,
coveringthe year to 30 June 2008.

"We are a full-service central bank," Dr Bollard said.
"That means we do monetary policy, bank supervision, payment and
settlement services, currency, liquidity and foreign reserves management all in
one building. In addition, we maintain close relations with The Treasury and
other parts of Government. In principle, that means we are better placed than
some of our offshore colleagues – where these functions are split –
to identify economic-financial stresses and do something about them."

Dr Bollard said the Bank has done a lot of work over the past few years to
prepare for market stresses. These developments are described in the Annual
Report.

"The Bank is also using its balance sheet differently. We have a new
foreign exchange policy to help smooth peaks and troughs in the exchange rate.
In addition, we have built up a planned open foreign exchange position to give
us more leverage in the event of severe volatility in the markets. We have a
new capital injection from the Government, and have invested in a more
sophisticated treasury management system."

Dr Bollard said the Bank continues to develop its macroeconomic analysis
tools, which now include a suite of data-driven forecasting models, and a new
central forecasting and policy model. It has done considerable work on the
effects and management of a slowing economy.

The Bank spent a net $38.1 million on activities covered by its Funding
Agreement, which was 7.1 percent below the $41 million in the Agreement. The
Bank generated a surplus of $535 million. Gross mark-to-market gains on the
Bank's open foreign exchange position were $344 million. A dividend of
$168 million has been paid to the Crown.

The Annual Report includes a pictorial supplement illustrating where
the Bank's funding comes from, where this is invested, what incomes it derives
and how this is spent. This is a new initiative aimed at providing a simple
overview of the Bank's finances for the lay reader. The Annual
Report can be viewed on the Reserve Bank website (www.rbnz.govt.nz).

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